Cosmos Crypto: What is ATOM & Should You Buy It?

How Do I Buy Cosmos?

Most people are going to want to buy Cosmos (technically ATOM) from a cryptocurrency exchange. There are many different kinds of crypto exchanges with some focusing on trading numerous forms of cryptocurrency while others act more like a brokerage, which simply gives people the ability to buy cryptocurrency with their fiat (such as USD or EUR).

Most legitimate cryptocurrency exchanges will require a significant amount of KYC (Know Your Customer) info from their userbase. Fortunately these days the process of KYC has been streamlined considerably and most users should be able to buy cryptocurrency relatively quickly. There are also peer-to-peer cryptocurrency exchanges where you can buy crypto directly from other users.

Cosmos is available for purchase on a number of different cryptocurrency exchanges including the following:

• Coinbase
• Binance
• Kraken
• KuCoin
• Huobi
• Bitpanda

How Does Cosmos Work?

The Cosmos software development kit makes it easy for new blockchain applications that can be connected across the Cosmos Network, but the two main ways Cosmos works are through Tendermint and Inter-Blockchain Communication protocols. Together they form the Cosmos Network.

Tendermint consists of two chief technical components: a blockchain consensus engine and a generic application interface. The consensus engine, called Tendermint Core, ensures that the same transactions are recorded on every machine in the same order. The application interface, called the Application Blockchain Interface (ABCI), enables the transactions to be processed in any programming language. Tendermint only handles the networking and consensus portions of the blockchain, meaning the application layer can define its own rules. This combination of components means that developers can quickly build individual, customized blockchains with different applications, and with their own set of governance rules and validator sets. These separately run blockchains are then compatible because of the Inter-Blockchain Communication protocol feature.

The Inter-Blockchain Communication protocol allows any blockchain running Tendermint, or any other fast finality blockchain engine, to transfer value or data to each other.

In the end, all kinds of blockchains can be linked across the Cosmos Network, creating an ecosystem.

What is the IBC?

To enable the vision of the Interchain, Cosmos developed the Inter Blockchain Communication Protocol (IBC). This tool does exactly what its name says; it allows different blockchains to communicate.

The IBC release was the final part in the development of the three major components of the Cosmos technology; the Tendermint Core, the Cosmos SDK, and the IBC.

To better understand IBC, think of how the Internet works. Specific protocol (TCP/IP) allows computers to communicate with centralized servers, thereby creating the Internet.

The IBC works similarly; only, it connects entire blockchain networks, as opposed to just a few mega servers. Hence it is arguable that the Interchain will be 1000x larger than the Internet. To use the IBC, you will need an Interchain account (such as a Cosmos wallet).

The best analogy for an interchain account is a letter. The letter is packed inside an envelope which is packed inside a box (the IBC module of zone A does this work). A delivery truck also called a relayer, transports the letter from zone A (blockchain 1) to zone B (blockchain 2). The IBC module of zone B will open the box and relay the envelope to the appropriate destination (receiving account).

Keplr Wallet: The Interchain Wallet

Keplr wallet is the first interchain wallet on Cosmos. It is a browser-based wallet similar to MetaMask for Ethereum or Phantom for Solana but with support for any IBC chain. It also has iOS and Google apps.

The interchain accounts are contained in a wallet, just like Ethereum addresses are contained in an Ethereum wallet.

You can immediately begin staking through the wallet to earn passive income and even manage tokens across different chains from just one wallet. You can also get even more security by connecting a Ledger hardware wallet to your Keplr account.

Keplr wallet supports over 16 chains, including Cosmos, Osmosis, Juno, Secret Network, Akash Network, Sentinel, Kava, Certik, and IrisNet, among many others. Keplr can be found on Google Playstore and IOS App store.

Staking Cosmos

Staking is a mechanism for securing networks. In return for securing the Cosmos Hub, users are rewarded with transaction fees and staking rewards.

Staking involves locking up crypto assets like ATOM to provide economic security for public blockchains. Users can get as high as 15% APY for their staked ATOM tokens. In short, if you stake 1000 ATOM, you earn 150 ATOM every year (12.5 a month). Rewards begin to generate immediately after the staking transaction is confirmed on-chain.

You can even stake different cryptos like Osmo or Juno to earn up to 80% APY!

There is no lock-up period, and users can claim rewards at any time using an IBC-supported wallet like Keplr. Keep in mind there is a 21-day cooldown period for un-staking your crypto, however.

To participate in staking, you will need to have ATOM tokens and a wallet and do the following:

1. Go to the Keplr website and Install Keplr (extension) for Chrome; download it on your android phone or your iPhone.
2. Open the extension after installing and create an account. Ensure that you secure your account by storing the seed phrase in a safe place offline.
3. Deposit ATOM into your wallet using the Deposit button.
4. Once your deposit goes through, click on stake to begin the staking process.
5. Pick a validator with which to stake your crypto.
6. Follow the subsequent instructions and confirm the transaction.

Interchain Security

As mentioned, staking will secure the network, not just the Cosmos Hub. Network validators (individuals or companies with a certain threshold of ATOM tokens, which is 1 ATOM) can choose to validate any chain in the Interchain using their ATOM delegation as collateral.

Cosmos is also a decentralized autonomous organization (DAO), and hence, holding ATOM tokens gives users the ability to vote (i.e., have delegation) on the governance of the network. By securing any chain using their ATOM as collateral, Interchain Security is guaranteed.

Users are incentivized to secure other chains on the Interchain since there will be additional rewards. These chains are called child chains or baby blockchains, while Cosmos is the parent blockchain. The more the child-chains, the more the rewards.

What About Airdrops?

When launching a new blockchain, developers need users to kick-start their project and provide some liquidity. This is generally done through something called airdrops, where users of certain projects (Ethereum, MetaMask, Uniswap for instance) receive free drops of a brand-new cryptocurrency or token.

These airdrops are sometimes worth thousands of dollars so they can be incredibly valuable.

Cosmos is home to a large number of blockchains and apps so it has historically been a prime blockchain to receive airdrops.

How do you qualify for free airdrops? It depends on the product that is launching but generally it’s one or more of the following:

• Stake ATOM (generally at least 5 but sometimes more)
• Vote on governance proposals
• Provide liquidity on DEXs like Osmosis
• Use the upcoming app or blockchain

One note about staking to receive airdrops. In order to encourage decentralization you are not allowed to use largest validators if you want to receive airdrops. That means you can’t use any of top-10 validators or exchange-run validator pools (such as Kraken or Binance).

Some of the newer projects are also rewarding stakers of assets like Juno, Osmo and SCRT so it pays to follow the community and keep a small amount of multiple IBC-related crypos.

The Advantages

The main advantages of Cosmos are that through Tendermint and Inter-Blockchain Communication protocols it will be possible to create a network of connected blockchains.

This network will allow token, data, and asset exchanges between them. The Hubs that connect all these varying blockchains require validators staking ATOMs, and will earn ATOMs for staking, therefore the more connected the network becomes, the greater ability for passive income to be generated through staking.

The vision for Cosmos finally seems to be happening with IBC chains Terra-Luna, Crypto.com, Osmo and Juno achieving huge amounts of success. Expect NFT and gaming projects to come to Cosmos in the near future.

It helps that Cosmos has also nailed many of the fundamental aspects of a good crypto including fast and cheap transactions and a good UI.

If you believe in a multi-chain future than Cosmos is certainly a good place to start.

The Disadvantages

It should be noted that Cosmos is not Bitcoin. It’s not trying to be Bitcoin either.

It’s an important distinction because they represent two very different approaches to crypto. Bitcoin is the ultimate hard asset and probably the best store of value in crypto (although this is open to debate). There are only 21 million Bitcoin and that’s all there ever will be.

Meanwhile Cosmos doesn’t even have a hard cap to its supply at this point (there are roughly 286 million currently in circulation) and is focused on experimenting, building out its ecosystem and providing incentives to the community for securing the network.

Bitcoin is a single asset while Cosmos is hoping to be an entire ecosystem of different assets than can easily communicate with each other.

Finally the 21-day period to un-stake your crypto is one of the longer lock-up periods in crypto, which means you can’t really pull your funds out if the market is crashing. Of course that also probably helps stabilize the price of ATOM somewhat.